By Daniel Leussink
TOKYO (Reuters) - Japan's factory output rose for the third straight month in August, in a positive sign for manufacturers as economic activity gradually recovered further from the impact of the coronavirus pandemic.
Demand among Japan's global trading partners, and especially China, has come off lows seen earlier this year when the virus crisis forced governments to impose lockdowns that hurt global trade and production.
Separate data showed retail sales posted their sixth straight month of declines in August as consumers turned to saving instead of spending largely due to worries over a fragile economic recovery.
Official data released on Wednesday showed factory output increased 1.7% in August from the previous month, boosted by rising production of automobiles and car parts as well as iron, steel and non-ferrous metals.
August's rise, which was slower than the previous month's record 8.7% gain, came in largely in line with the median market forecast of 1.5% growth in a Reuters poll of economists.
Manufacturers expect output to rise 5.7% in September and 2.9% in October, the Ministry of Economy, Trade and Industry (METI) said.
"If September's forecast is realised, manufacturing output would rebound by 10% quarter-on-quarter this quarter," said Tom Learmouth, Japan economist at Capital Economics in a note.
"Both gross domestic production and manufacturing activity still have plenty more lost ground to make up."
The government raised its assessment of industrial production a notch to say it was picking up.
In a sign of Japan's struggle to shake off weak consumer demand, retail sales fell 1.9% in August from the previous year, declining for the sixth month, separate data showed on Wednesday.
The fall was not as sharp as a 3.5% drop seen by economists in a Reuters poll, and followed a 2.8% drop in July.
The world's third-largest economy posted its worst postwar contraction in the second quarter as the COVID-19 crisis paralysed business and consumer demand.
It had already slipped into contraction late last year as consumer sentiment slumped after the government last October raised the nationwide sales tax to repair its extremely heavy public debt burden.
